What is Anticipatory Breach of Contract?
Anticipatory breach of contract is also known as anticipatory repudiation of contract. Anticipatory breach of contract meaning has been explained in the provisions of the contract law. Anticipatory breach of contract means that the contract has been repudiated even before the performance of the contract has actually commenced.
In simple terms the anticipatory breach of contract meaning is that a promising party in a contract does not intend to live upto his or her obligations under the terms of the contract. When a party to a contract is incapable to perform or there is a lack of willingness to perform the contract even before the due date of the contract then it is anticipatory breach of contract.
The anticipatory breach of contract by one party gives the right to other party of the contract to claim damages and compensation under the anticipatory breach of contract Section 39 of the Indian Contract Act
There are two types of anticipatory breach of contract which are discussed below :
Express Repudiation: In this type of anticipatory breach the party breaches the contract expressly. It means that the party to the contract has clearly refused to perform his part of the contract even before the actual due date of the contract.
Implied Repudiation: In this type of anticipatory breach of contract the party does not clearly refuses to perform his or her obligation rather imply from his/her words or actions that he/she is not going to perform his part of contract before the due date of the contract.
In case anticipatory breach of contract has happened with you then you can consult the top civil lawyers for the anticipatory breach remedies.
Effect of Anticipatory Breach of Contract
When an anticipatory breach of contract is committed the injured or the aggrieved party generally has two options at his/her disposal. The options available to the injured party in case of anticipatory breach of contract are as follows :
As soon as the anticipatory breach has been committed, the injured party can rescind or repudiate the contract and can bring an action for damages for anticipatory breach of contract without waiting for the due date for the performance of the contract.
The other option is that the injured or the aggrieved party waits till the due date fixed for the performance of contract and then bring a case against the defaulting party for breach of contract.
There are four key factors which are considered essential to determine whether an anticipatory breach of contract has happened or not. These factors are as below:
When the party has clearly communicated that he will not perform his part of obligation and such performance goes to the root of the contract,
The renunciation or repudiation to perform a contract cannot be conditional on certain circumstances taking place. The refusal, therefore should be absolute.
While deciding whether there has been sufficient refusal to perform the obligation of the contract, it must be judged according to whether a reasonable person in the position of the innocent party would regard the refusal as being clear and absolute.
What are the Anticipatory breach of Contract Remedies?
Any contract can be said to be breached when one party to the contract unconditionally refuses to perform his part of the contract. When this refusal to do the obligation under the contract is done before the due date of the contract then it is known as anticipatory breach of the contract. The Indian contract act provides for anticipatory breach of contract remedies which are provided to the aggrieved party against the party committed anticipatory breach of contract.
Following are the anticipatory breach of contract remedies which are provided in the Indian Contract Act :
Monetary Damages - It includes a sum of money that is awarded as a compensation for the financial losses suffered by the party against whom the anticipatory breach has been committed. The party can claim the bargain which he/she was entitled for under the terms of contract or can ask compensation for the net gain which they have occurred if the anticipatory breach of the contract would not have been done. In case of an anticipatory breach the party can recover the damages only to the extent of amount of actually spent by the party in execution of his part of the performance.
Restitution - It is an anticipatory breach of contract remedy which provides that the injured party of the contract in the same position as he/she was in before the contract was made. If the Restitution is chosen as the anticipatory breach of contract remedy then the injured party cannot ask for compensation for the loss incurred by him because of the anticipatory breach of contract. Restitution as a remedy focuses on returning the injured party money or the property which has been given to other party of the contract who has committed the anticipatory breach of contract.
Rescission - It is a remedy of the contract which puts an end on the obligation of both the parties completely. The parties that are indulged in the contract due to the mistake, fraud, undue influence can ask to set aside the the contract and the obligations formed thereunder by way of remedy of rescission available in such cases.
Reformation - It is a remedy available in case of a breach of contract. In this type of remedy the court changes those substance of the contract because of which inequities was suffered by the injured or the aggrieved party to the contract. The courts generally resist in providing the remedy of the reformation as a mistake in a contract can be easily changed by doing a pre-contract signing investigation.
Specific Performance of Contract - Specific performance of the contract is an equitable remedy available in case of anticipatory breach of contract or an actual breach of contract. This remedy compels the breaching party to perform his part of the contract i.e., his or her duties as specified under the terms of the contract. When the monetary damages are inadequate to compensate the injured or aggrieved party against the anticipatory breach of contract only then the court orders for the remedy of the specific performance of contract. The remedy of specific performance of the contract is generally given when the subject matter of the contract is the main reason of the dispute.
In case anticipatory breach of contract has been committed against you consult the famous civil lawyers near you to get the proper assistance and to know which remedy is best suited for you.
Anticipatory Breach vs Actual Breach of Contract
The remedies discussed above are available for both anticipatory breach of contract and actual breach of contract. Where anticipatory breach means a breach committed before the due date of the performance of the contract, actual breach is a breach committed on the due date of the contract.
Other than this difference there are following difference between the Anticipatory Breach of Contract and Actual Breach of Contract -
||Anticipatory breach of contract happens when a party to the contract tells his incapability to perform his part of the contract in advance i.e., before the due date of the contract.
||Actual breach of contract happens when a party on the date of the performance of the contract fails to perform his part or his duties as specified in the contract.
|Nature of Breach
||Nature of breach in case of anticipatory breach of contract is that the entire contract is repudiated.
||In an actual breach of the contract, the breach can be of warranty, condition or an innominate term.
|Effect of Breach
||The injured party in case of anticipatory breach can either accept the breach or can continue with the contract.
||In an actual breach of contract the injured party can only go for the remedy available for breach of contract.
Anticipatory Breach of Contract Cases
Indian Judiciary has dealt with the issue of anticipatory breach of contract in a number of cases before it. Some of the landmark anticipatory breach of contract cases which explains and deals with anticipatory breach of contract at length are discussed below :
In the case of Food Corporation vs J.P. Kesharwani, 1994 Supp (1) SCC 531, it was held by the Supreme Court that where one party making unilateral alterations without any intimation to the other and then cancelling the contract, this amounted to breach (repudiation). Therefore it can be correctly stated that, any kind of contract may be examined as broken once a party refuses to perform under the contract as promised, regardless of when performance is supposed to occur. This unconditional refusal is known as a repudiation of contract.
In the case of Universal Cargo in the year 1957 it was held by the Supreme Court that the “Anticipatory breach means that a party is in breach from the moment that his actual breach becomes inevitable. Since the reason for the rule is that a party is allowed to anticipate an inevitable event and is not obliged to wait till it happens, it must follow that the breach which he anticipates is of just the same character as the breach which would actually have occurred if he had waited.”
Further, in the case of Aslhing v L.S. John, (1984) 1 SCC 205, whereby the respondent who was a party to a subsisting contract with the government for widening of a road, had written a letter to the concerned Executive Engineer stating that he was closing the said contract. The appellant contended that the contents of the letter did not have the effect of putting an end to the contract. In this case the judgement of the court was delivered by Fazal Ali J. it was argued that the contents of the said letter made no effect in closing the contract. However after going through the contents of the letter it was absolutely made clear, that the contractor unilaterally dismissed the contract and informed the concerned department, also he resigned from the contractors list’s of PWD Manipur. Thus after this letter the contract got repudiated and acceptance of the letter by the authorities was unnecessary for putting an end to the contract although breach may give rise to an action for damages.
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